This Q&A article covers accidental damage from a leaking tap, insurance excess, fidelity guarantee insurance and more general insurance questions for people living in strata properties in South Australia.
Table of Contents:
- QUESTION: A lot owner is a volunteer and looks after the gardens for free. If the body corporate pays this owner to paint the building, are there any insurance implications?
- QUESTION: Under what circumstances is a Strata Corporation in South Australia required to be covered by fidelity guarantee insurance?
- QUESTION: 30+ years ago, the developer put the visitor parking under a huge heritage tree. If an accident occurs, are strata liable if we fail to move the car park?
- QUESTION: If a louvre dislodges and falls over the balcony to the ground below and damage a car, whose insurance would this fall under? Would it be mine or the Strata Corporation’s?
- QUESTION: How do I complain about a strata insurance claim not being honoured?
- QUESTION: If water damage has been caused by a faulty tap in the upstairs unit, can the downstairs owner claim accidental damage for the repairs to the building such as ceilings and walls?
- QUESTION: I had a breach pipe in the shower and insurance has paid the claim. Who pays the insurance excess – the owner or the body corporate? I assumed the body corporate.
Question: A lot owner is a volunteer and looks after the gardens for free. If the body corporate pays this owner to paint the building, are there any insurance implications?
A lot owner in our building looks after the ground for free. To save costs, can we pay this person to paint the building? It would save the body corporate thousands of dollars. We are confident in their quality of workmanship.
Our treasurer is concerns about the insurance implications if we pay for work. Can work can be done voluntarily around the units? Are there different rules if we pay the lot owner for the work?
Answer: Is the body corporate covered in case of damage to the corporation property and injury to the lot owner providing the services?
This is a great question. Many lot owners perform work around the common property and do so voluntarily, or are reimbursed for expenses incurred.
A body corporate can authorise a person at a meeting to perform various maintenance tasks. If the lot owner is performing a task voluntarily on behalf of the body corporate, many insurance policies will provide cover in case of injury for voluntary workers. Some body corporates may purchase insurance cover for the lot owner to perform regular services for the body corporate. This will cover the lot owner as if they are a contractor providing services to the body corporate.
Other body corporates may just reimburse the lot owner upon providing a receipt for expenses. There are no set rules in how a body corporate handles this matter, however, there is an important factor to consider. Is the body corporate covered in case of damage to the corporation property and injury to the lot owner providing the services?
Tyson D’Sylva Ace Body Corporate Management E: tyson.d@acebodycorp.com.au P: 08 8342 1544
This post appears in Strata News #652.
Question: Under what circumstances is a Strata Corporation in South Australia required to be covered by fidelity guarantee insurance?
Answer: There is no specific requirement to take cover out under strata legislation in any state or territory in Australia.
Fidelity guarantee insurance covers embezzlement, theft misappropriation, conversion or fraud relating to the body corporate funds and assets such as your sinking and administration fund.
There is no specific requirement to take cover out under strata legislation in any state or territory in Australia, however some insurers will offer the cover automatically with no provision to opt out of the cover.
If you are lodging a claim for fidelity cover, most policies will require that you lodge the claim within 12 months of the policy expiry and some policies in the market will provide cover for auditor’s fees.
Tyson D’Sylva Ace Body Corporate Management E: tyson.d@acebodycorp.com.au P: 08 8342 1544
This post appears in Strata News #622.
Question: 30+ years ago, the developer put the visitor parking under a huge heritage tree. If an accident occurs, are strata liable if we fail to move the car park?
When our strata was being developed in the 1980s, the developers put a paved visitor parking space right next to a 200-year-old red gum. It’s a heritage tree so it can’t be removed. If visitors park under the tree, they risk car damage if the tree drops a branch.
Are strata liable if we fail to move the car park? We can and should we move the visitor parking space to a safer spot?
Answer: If you believe there is an imminent risk of danger, the owners corporation should take reasonable action to minimise the risk.
Liability is something that is determined on a case by case scenario by solicitors (and sometimes judges) based on the actual claim.
If there is a claim made against the body corporate for personal injury or property damage related to the tree overhanging the car park, it can be considered under the public liability section of your policy.
If you believe there is an imminent risk of danger, the owners corporation should take reasonable action to minimise the risk as claims history is a major rating factor for insurers.
Tyrone Shandiman Strata Insurance Solutions E: tshandiman@iaa.net.au P: 07 3899 5129
This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Shandit Pty Ltd T/as Strata Insurance Solutions strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisernet Australia AFSL No 240549, ABN 15 003 886 687.
This post appears in Strata News #526.
Question: If a louvre dislodges and falls over the balcony to the ground below and damage a car, whose insurance would this fall under? Would it be mine or the Strata Corporation’s?
I am about to have a large louvred roofed canopy built over my 15th floor balcony if strata body and council allow it.
Once it’s completed, if a louvre dislodges and falls over the balcony to the ground below and damage a car, whose insurance would this fall under? Would it be mine or the Strata Corporation’s?
Answer: Liability claims are considered on a case by case scenario by insurers, solicitors & judges (if the claim ends up in court) and for this reason it is not possible to give a “one size fits all” answer to a hypothetical scenario.
Liability claims are considered on a case by case scenario by insurers, solicitors & judges (if the claim ends up in court) and for this reason it is not possible to give a “one size fits all” answer to a hypothetical scenario as there can be number of factors that can change the outcome of any liability claim.
It is not unusual for multiple parties can be named on a personal injury claim. In this instance it can include, but not limited to, the lot owner, the builder or the body corporate (individually or jointly) and the claimants solicitor will decide who to claim against factoring all circumstances including but not limited to negligence, applicable legislation etc.
Provided the policies have public liability cover, claims that are made against the strata corporation will be a claim under strata insurance and claims against the owner will be a claim for the lot owners contents/landlord insurance – Where both parties are named, a claim should be made on both policies.
Upon lodgement of a claim, the insurer will review the circumstances and after seeking legal advice, will either defend the claim or seek to settle the matter, depending on the insurers view of what is the most commercial outcome factoring in expenses (such as defence costs & settlements) and the insurers view on prospects of successfully defending the claim.
Tyrone Shandiman Strata Insurance Solutions E: tshandiman@iaa.net.au P: 07 3899 5129
This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Shandit Pty Ltd T/as Strata Insurance Solutions strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisernet Australia AFSL No 240549, ABN 15 003 886 687.
This post appears in Strata News #419.
Question: How do I complain about a strata insurance claim not being honoured?
Answer: It must be noted, some elements of this possible claim may not fall under Building Insurance.
The insurance industry has a robust process in place to deal with complaints by customers. The complaints handling process is shown in the insurers Product Disclosure Statement and I recommend requesting a copy of this prior to starting a complaint. Complaints are managed in three phases as set out below.
Enquiry: The first step is to express your concerns/complaint to the claims manager handling the claim. Within a reasonable timeframe, the claims manager should respond to your concerns and either cover your claim or maintain their decision to deny the claim.
Internal Dispute Resolution (IDR): If you remain unsatisfied with the response, you can refer a complaint to IDR. Generally, the dispute resolution process is handled by a review committee within the insurance company independent of the original claims manager. The insurer has 15 working days (3 weeks) to respond to your complaint. Some insurers have a 2 step complaints process, whereby your complaint is reviewed by an initial review committee and then a secondary “stage 2” committee.
Australian Financial Complaints Authority (AFCA): If you are still not satisfied with the result of your dispute, you can refer the claim to AFCA. AFCA are a dispute resolution organisation independent of the insurance company. AFCA’s decisions are binding on the insurer but not on the policy holder. To lodge a dispute with AFCA, you must first have submitted a dispute via the insurers IDR and received their response. The response time from AFCA is between 6-12 months and for this reason we recommend trying to resolve the dispute with the insurer at all costs.
- What is the cost for complaints – The cost of complaints is covered by insurers. If the complaint is referred to AFCA it can cost the insurer as much as $7,000 for the review. If you lodge a claim with AFCA that has no prospects of success and this costs the insurer, this can impact cost of future policies and insurability; Try to resolve the claim with the insurer at all costs – If you refer a claim to AFCA it can take as long as a year for a response and AFCA fees will form part of the cost of claims and impact your claims history – for this reason, we recommend trying to resolve complaints with the insurer at all costs;
- Base your complaint on the policy terms and conditions – What a policy holder and an insurer believes should be covered can differ. That is why a Product Disclosure Statement issued prior to the policy being purchased, outlines the terms and conditions of the policy. We recommend taking the time to understand the insurers position on declining and base your arguments on why your claim should be covered on the policy wording. Try to avoid getting into moralistic arguments about complaints related to policy coverage as AFCA often base their decisions on the terms and conditions of the policy wording;
- Search decisions in AFCA – You can search past decisions handed down within AFCA based certain keywords. This can be helpful in better understanding how your complaint may be handled. Visit https://www.afca.org.au/what-to-expect/search-published-decisions;
- Seek professional assistance from a broker – If your policy is managed by a broker seek their advice about your complaint. Brokers represent the policy holder and not the insurer in disputes. A good broker will advise on the prospects of success of your claim and whether it is in your interest to go to dispute resolution. A broker should also manage the dispute resolution process as well.
Tyrone Shandiman Strata Insurance Solutions E: tshandiman@iaa.net.au P: 07 3899 5129
This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Shandit Pty Ltd T/as Strata Insurance Solutions strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisernet Australia AFSL No 240549, ABN 15 003 886 687.
This post appears in Strata News #376.
Question: If water damage has been caused by a faulty tap in the upstairs unit, can the downstairs owner claim accidental damage for the repairs to the building such as ceilings and walls?
A circa 1970’s 3 story apartment block in South Australia. A second-floor apartment has had water come through the ceiling causing damage to the ceiling. The owner is also complaining of water damage to window blinds, wooden floating floors as well as the inconvenience of the cleanup.
Who is responsible for the repairs to the building such as ceilings and walls?
If the origin of the water is from a faulty tap causing flooding to the third story unit above, can the owner of the second story unit claim against the owner of the third story unit (nonmalicious, accidental damage)? Who pays the insurance excess?
Answer: It must be noted, some elements of this possible claim may not fall under Building Insurance.
Thank you for your query regarding this ceiling damage. Water damages (where the damages are not a result of wear and tear, lack of appropriate maintenance), is the precise reason why Strata Building Insurance is mandatory – to protect Owners from unexpected issues such as water damage.
A maintenance repair to an internal tap is the responsibility of a Unit Owner (i.e the 3rd Storey Owner), and an investigation should be completed on the unit to ensure this is the only item which has created the water damages (loss).
The water damages below (second storey) should be reported to the groups Building Insurer, who will determine whether these damages are coverable under their specific Policy. Whilst each Policy is different, every Insurer will have a form of water damages policy.
It must be noted, some elements of this possible claim may not fall under Building Insurance. The window blinds for example, most likely will fall outside the Building policy and instead sit under the Contents Insurance Policy of the party experiencing the water damages (i.e Storey 2 Unit Owner) to claim under their Contents Insurer.
Floating Floors previously were also always a Contents claim, however, some Building Insurance Policies now include Floating Floors, or can include them as an optional extra on the Building Policy.
The Contents Insurer should be advised of the probable claim relating to the floating floors and blinds. It is not uncommon in circumstances like this, for there to be two claims running side by side. Review both policies.
This post appears in Strata News #194.
Tony Johnson Stratarama E: Tony@stratarama.com.au P: 08 82760426
This article is not intended to be personal advice and you should not rely on it as a substitute for any form of advice.
Question: I had a breach pipe in the shower and insurance has paid the claim. Who pays the insurance excess – the owner or the body corporate? I assumed the body corporate.
If it is the body corporate’s expense, what is the correct process? Is it ok to go ahead and pay the owner from the strata account once we all have agreed?
Answer: Different Owners Corporations have different rules around insurance claims
Whitbread Insurance Brokers: The short answer is that insurance companies do not decide who is responsible for the payment of any excess as different Owners Corporations have different rules around insurance claims. In general, the Owner will need to confirm with their Owners Corporation if they would be responsible for the excess.
Tyson D’Sylva, Ace Body Corporate Management: Who should pay the excess is a tricky one and it is always good to get clarity from the owners at the AGM and pass a resolution.
We have found that if the claim was made due to lack of corporation maintenance, then why should the owner pay the claim?
Generally, the entity that is making the claim would pay the excess, and in this case, it is the owner who is claiming on the policy, so in most cases like this (burst breech pipe), the owner would pay the excess.
There is no clear-cut answer on who pays the excess as each claim can be different however it always makes for good discussion at the AGM, so if you haven’t had one yet it is best you add it to the agenda and get a clear resolution.
This article is not intended to be personal advice and you should not rely on it as a substitute for any form of advice.
Have a question or something to add to the article? Leave a comment below.
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